1What is the objective of IAS 1?
The objective of IAS 1 is to prescribe the basis for the presentation of general-purpose financial statements to ensure comparability with the entity’s own financial statements from previous periods and with the financial statements of other entities.
2What are the components of a complete set of financial statements under IAS 1?
1. Statement of financial position (balance sheet)
2. Statement of profit or loss and other comprehensive income
3. Statement of changes in equity
4. Statement of cash flows
5. Notes, including significant accounting policies and other explanatory information
3What are the 2 options allowed for statement of profit or loss and other comprehensive income?
IAS 1 Presentation of Financial Statements applies The Framework’s
requirements for a statement of performance by allowing a choice of two
presentations of profit or loss and other comprehensive income:
A statement of profit or loss and other comprehensive income; or
A statement of profit or loss showing the profit or loss for the period PLUS
a separate statement of other comprehensive income, which will also
include a total for total comprehensive income
4What is the accrual basis of accounting?
IAS 1 requires financial statements to be prepared using the accrual basis, meaning transactions are recorded when they occur, not when cash is received or paid.
5What is the going concern assumption?
The financial statements must be prepared on a going concern basis unless management intends to liquidate the entity or cease trading.
6What are current and non-current assets?
Current assets are expected to be realised within 12 months or consumed in the entity’s normal operating cycle.
Non-current assets do not meet the criteria for current assets (e.g., property, plant, and equipment).
7What is the difference between profit or loss and other comprehensive income (OCI)?
Total comprehensive income is the profit or loss for the period, plus other
comprehensive income.
Other comprehensive income (OCI) includes income (gains) and expenses
(losses) that are not recognised in profit or loss (i.e. they are recorded in
reserves rather than as an element of the profit for the period).
In F1, other comprehensive income mainly includes any change in the
revaluation surplus.
8How are material items disclosed in respect of profit or loss
When items of income and expenses are material, their nature and
amount shall be disclosed separately before operating profit.
This may either be done on the face of the statement of profit or loss and
other comprehensive income or in the notes. (other comprehensive income is reserved for gains or losses recorded in reserves)
Examples:
– inventory write-offs
– impairment losses
– restructuring costs
– disposals of property, plant and equipment
– litigation settlements
9What are some key principles of IAS 1? (5)
Fair presentation
Going concern
Accrual basis of accounting
Consistency of presentation
Materiality and aggregation
10What is materiality in financial statements?
Information is material if omitting or misstating it could influence the decisions of users of the financial statements.
Materiality is a main considerations when deciding whether to include an additional line item in the
statement of profit or loss.
11When must an entity present comparative information?
An entity must present comparative information for all amounts reported in the financial statements unless IAS 1 or another standard allows an exemption.
12What is the purpose of notes to the financial statements?
The notes provide additional explanations and details about the financial statements, including significant accounting policies and any required disclosures.
13What should be in the notes to financial statements
Notes to the financial statements normally include narrative
descriptions or more detailed analysis of items in the financial
statements, as well as additional information such as contingent
liabilities and commitments.
IAS 1 also provides guidance on the structure of the accompanying
notes to financial statements, the accounting policies and other
required disclosures.
The notes to the financial statements of an entity should:
(a) present information about the basis of preparation of the financial
statements and the specific accounting policies adopted for
significant transactions
(b) disclose the information required by other IFRSs that is not
presented elsewhere in the financial statements
(c) provide additional information which is not presented elsewhere in
financial statements but is relevant to an understanding of any of
them
Notes to the financial statements should be presented in a systematic
manner and any item in the financial statements should be cross-
referenced to any related information in the notes.
Notes are normally provided in the following order, which assists users
in understanding the financial statements and comparing them with
those of other entities:
(a) statement of compliance with IFRSs
(b) summary of the significant accounting policies applied
(c) supporting information for items presented in each financial
statement in the order in which each line item and each financial
statement is presented
(d) other disclosures, including:
– contingent liabilities, commitments and unrecognised
contractual commitments, other financial disclosures
– non-financial disclosures
14What is the minimum presentation of profit or loss
IAS 1 is a ‘minimum presentation’ standard with required presentation of revenue, finance costs and tax.
If we do have a discontinued operation per IFRS 5 Discontinued operations we will need to show a single
line the amount of profit or loss from a discontinued operation.